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Tax returns and frugality

It’s tax season. Your response to that phrase is either going to be “GASP” or “WOO HOO!”
So…Getting $50 back from Uncle Sam? $500? $5000?

This can be a dicey proposition for some of us: a little extra money can easily go toward something frivolous, or something you don’t need. That can be okay sometimes – but if you’re getting a large amount (or even a small one), sometimes you’re going to get a lot more value out of thinking long-term. And frugally.

Without further adieu, here are some ideas for how to spend your tax refund.

Whether small or big or huge, some wise thinking now can pay off big later. Here goes:

If you’re getting $50 back…
Don’t spend it all in one place.

Actually, $50 is a good amount to use to open up an account at your local credit union. Why? Credit Unions are great places to have membership – you’re not a number, you’re a “member,” and, with the focus on the “1%” and everyone in banking making zillions of dollars, note that all credit unions are not-for-profits. And insured as well. Learn more at this website: A Smarter Choice.

If you’re getting $250 back…
Is it time to start investing? $250 might be a good number to start an account with something like Sharebuilder – where trades are $4 each.

OR, if you already have mutual funds, see if you can invest some more – look for a “no-load” fund.

Funny enough, your insurance company might have mutual funds, too. (Frugal Freida just found out State Farm has mutual funds. Who knew???)

If you’re getting $500 back…
How about paying down a nasty credit card?

By nasty, we mean the one with the highest interest rate. BUT, some experts will recommend that, instead, you start paying down the one that is closest to zero. The mental effect of having a credit card with a zero balance can be a real plus for your psyche.

If you’re getting $1000 back…
Have you started your holiday shopping yet? Even if you’re not picking up stuff for Christmas now, think about those things like birthdays and anniversaries – and consider taking care of the ones you can take care of now.

OR, but things off-season…For instance, if you live somewhere cold and snowy, since it’s now April, see if you can find some discounted snowblowers or stock up on winter coats from the sale rack.

If you’re getting $5000 back…
Consider maxing out on your retirement plans – if you have an IRA, use that 5 grand windfall to add to it. Or, if you don’t have one, check with your tax professional and find out if it makes sense to open one.

Or, start a 529 plan for your kids – that’s a tax-free way to save for their college education.

Is this the definitive guide for what to do with your tax refund? No…

But we hope you can at least start thinking about how to spend that extra money.

Awesome advice. We have terrible self control, so we decided we're going to open a seperate account and have our student loan and car insurance payments deducted out of it. We'll have ayear's worth of both in there and put most of the rest in savings. There are a few bills we have to pay right away and on eor two things we need to get for the family, but most of it is getting put in the bank.

You have to make your mind up about how you're going to live your life! With this kind of mentality, you're stuck no matter what kind of luck falls on you.

It's not hard to start a savings. Grab a spaghetti sauce jar and put a penny in it. Take the kids for a walk and grab some recycling as you go...every penny counts. Call your billers and find out if there is any hardship reductions you can get for being laid off. Since you are laid off, can you temp or look for alternative work? Babysit? Shovel snow or pick up yard debris?

I know - probably thinking I don't get it, never been in your shoes. Absolutely right. I've never considered my financial condition my personal status. If I have to grow my own potatoes and eat ramen noodles so my kids get some milk and a little meat, I've found a way to change our lives. No special fairy dust hit us, just honest sacrifice and some hard work with a positive mindset. My parents are day laborers. We grew up picking in the fields and sweeping construction sites, my mom was a waitress at a Big Boys and cleaned other peoples homes. We were constantly "camping" because they couldn't afford rent. That way of living - I know how to make it if I need to but I'll be damned before I tell myself "this is it for us". My kids deserve the world and yes, if I have to scrub other people's clothes, pick up dog poop, and scrape gum off the bottom of a McDonald's booth to make sure they get it, I will.

I hope you have a better day today than when you posted this. I hope you get some good people around you to lift you up. I wish you luck.

Quoting Saphira1207:

* snort *

i was layed off. I'm using my refund for bills and I bought a enw bed for the kids (they were getting to tall for the ones they have) as well as new to me furniture.

If I hadn't been layed off I still wouldn't bother with any of the things you suggested - I'd still use it to pay bills, buy extra food to freeze and get a few fun things for each of us.

using a refund for what you suggested is only possible if you are solidly in the middle and upper classes.

the rest of us schlubs can't afford to do that sort of thing with our money.

I wasn't in a bad mood. I wasn't thinking at all about whether you get it because you've "never been in my shoes". I hadn't actually thought about that at all when I read your response.

Camping year round isn't possible here. The average night temp is -20. And most physical labor is out due to back issues - but I do thank you for the suggestions.

No- What I was referencing in my post was that the suggestions, and presumptions of the OP were and are often assumed to be universal to all socioeconomic classes. In fact, they are not.

There are very few people in the lower classes who can afford to do those things with their refunds. They have too many bills, almost always overdue, and too little money in their paycheck, so those refunds are used for more practical and immediate needs.

And as lovely as the stories are of those who've overcome poverty to lead better lives (including yours apparently) the facts speak to a far different reality. People like you are few and far between, not the norm. And this may be hard for you to see if you're surrounding yourself with the outliers like yourself.

I, on the other hand, not only have been living this life, I went to college to further study it. College only confirmed what I had always thought. That the rags to riches stories are just that - only stories and that the way our society is structured is what is making it so hard for people like myself to get a head. (Please note that I did not say it was impossible, just extremely hard) I had suspected that for decades so it was no surprise when I studied things like Law and society, Family, and Gender in society to find that our institutions have been designed from the beginning to keep this inequality in our country.

I congratulate you on being an outlier and doing well for yourself. I'm sure I can follow if I can just figure out a way to find a decent paying job where I am. I would rather work on getting those using SNAP benefits to participate in community gardening as a requirement of obtaining those benefits, but a payscale big enough to pay the bills would suffice.

Quoting mybratsmom:

Oh my gosh, this is just plain sad.

You have to make your mind up about how you're going to live your life! With this kind of mentality, you're stuck no matter what kind of luck falls on you.

It's not hard to start a savings. Grab a spaghetti sauce jar and put a penny in it. Take the kids for a walk and grab some recycling as you go...every penny counts. Call your billers and find out if there is any hardship reductions you can get for being laid off. Since you are laid off, can you temp or look for alternative work? Babysit? Shovel snow or pick up yard debris?

I know - probably thinking I don't get it, never been in your shoes. Absolutely right. I've never considered my financial condition my personal status. If I have to grow my own potatoes and eat ramen noodles so my kids get some milk and a little meat, I've found a way to change our lives. No special fairy dust hit us, just honest sacrifice and some hard work with a positive mindset. My parents are day laborers. We grew up picking in the fields and sweeping construction sites, my mom was a waitress at a Big Boys and cleaned other peoples homes. We were constantly "camping" because they couldn't afford rent. That way of living - I know how to make it if I need to but I'll be damned before I tell myself "this is it for us". My kids deserve the world and yes, if I have to scrub other people's clothes, pick up dog poop, and scrape gum off the bottom of a McDonald's booth to make sure they get it, I will.

I hope you have a better day today than when you posted this. I hope you get some good people around you to lift you up. I wish you luck.

Quoting Saphira1207:

* snort *

i was layed off. I'm using my refund for bills and I bought a enw bed for the kids (they were getting to tall for the ones they have) as well as new to me furniture.

If I hadn't been layed off I still wouldn't bother with any of the things you suggested - I'd still use it to pay bills, buy extra food to freeze and get a few fun things for each of us.

using a refund for what you suggested is only possible if you are solidly in the middle and upper classes.

the rest of us schlubs can't afford to do that sort of thing with our money.

We used ours to pay off our car and let me just say our loan was through a credit union and they have terrible customer service and a sky high interest rate. Not all credit unions are created equal. Their corporate office will be getting a nasty letter from me and I rarely complain.

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